Finding Text
• Identification of the federal program
AL #14.181, Department of Housing and Urban Development, Section 811 Capital Advance 2015
• Criteria
The compliance supplement states that "Owners shall establish and maintain a replacement
reserve to aid in funding extraordinary maintenance and repair and replacement of capital items.
The replacement reserve funds must be deposited in a federally insured depository in an interestbearing
account. All earnings including interest on the reserve must be added to the reserve. An
amount as required by HUD will be deposited monthly in the reserve fund (Regulatory
Agreement, item 5 (a)). All disbursements from the reserve must be approved by HUD (24 CFR
section 891.405)."
• Condition
As of December 31, 2023 the account maintained at a federally insured depository is not interest
bearing.
• Cause
The Project did not verify that the account was interest bearing at the time it was opened and has
not corrected this error.
• Effect or potential effect
The Project is not in compliance with the requirements set forth by HUD related to its reserve for
replacement account.
• Questioned costs
None
• Identification as a repeat finding
This is not a repeat finding.
• Recommendation
The Project should transfer its reserve for replacement balance to a new account within a
federally insured financial institution which is interest bearing.
• Views of responsible officials
The Organization’s agrees with this finding and has implemented additional accounting policies
and procedures, as well as staffing changes, in order to correct these issues. See the response
included in the Corrective Action Plan.